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The federal tax man has added a simplified option for small businesses and entrepreneurs to deduct use of their home as an office.

The Internal Revenue Service today announced a new optional deduction, which is capped at $1,500 per year based on $5 a square foot for up to 300 square feet. The IRS said the deduction would eliminate paperwork and record keeping burden on small businesses by 1.6 million hours annually.

Nearly 3.4 million taxpayers claimed deductions for business use of a home in tax year 2010, the most recent available data.

Currently, homeowners are generally required to fill out a 43-line form (Form 8829) with complex calculations of expenses, depreciation and carryovers of unused deductions.

Under the new option, which will be available starting with the 2013 return, taxpayers will complete a simplified form.

The National Association for the Self-Employed praised the the government for providing the new home office deduction option.

“This is terrific news for the 52% of all small business that work from home, who fight every day to meet their bottom lines while continuing to contribute to the economy,” said Kristie Arslan, President and CEO of NASE. “The previous calculation for the deduction was cumbersome and time consuming for America’s smallest business and year after year hard-earned dollars were left on the table.”